One of the hundreds of bills Gov. Wes Moore has signed into law this month attempts to reduce discrimination in real estate appraisals by making a relatively small change: eliminating the bachelor’s degree requirement from certain types of appraiser licenses.
A report released earlier this year by the Abell Foundation found evidence of “systematic” discrimination that leads to under-valued homes in predominantly Black neighborhoods in the Baltimore region.
The analysis compared home sale contract prices with appraisal values.
“What our analysis showed was that if you live in a minority neighborhood, as opposed to a mixed or white neighborhood, there was a greater likelihood of those appraisals coming in below the contract sale price, and if you live in a predominantly white neighborhood, you observed actually appraisals coming in more frequently above the contract sale price,” said Ira Goldstein, a senior advisor for the policy solutions group at Reinvestment Fund and co-author of the report.
The issue also affects homeowners who want to refinance a mortgage, as Nathan Connolly and his wife Shani Mott experienced in 2021. Both Black, and both professors at Johns Hopkins University, the couple had made significant improvements since buying their house in Baltimore City’s Homeland neighborhood and watched as the local housing market appreciated. They expected to see their home value go up when an appraiser assessed the house as part of the refinancing process.
When the appraisal came in lower than they were expecting, they did what’s known as “whitewashing” their home — they removed family photos and asked a white colleague to pose as the homeowner — and got a second appraisal. This time it was nearly $300,000 higher.
Connolly declined to comment for this story, but the details of their experience are part of a lawsuit he and Mott, who has since died, filed in August 2022.
“To be told in so many words that our presence and the life we’ve built in our home brings the property value down? It’s an absolute gut punch,” Connolly told The New York Times when they filed the suit.
Those who study discrimination in real estate transactions say one likely cause of bias is the fact that the overwhelming majority of appraisers are white men. According to the Appraisal Institute, the professional organization for appraisers, 77% of appraisers nationally are white and 68% are men.
A state task force dedicated to reducing appraisal bias released a series of recommendations in November. One recommendation is to diversify the industry by reducing barriers to entry for minorities, including by eliminating the requirement that someone have a bachelor’s degree to qualify for an appraiser license.
And that’s the focus of Del. Kym Taylor’s bill, which Moore signed into law earlier this month. The law takes effect in October.
“We might have an appraiser from Virginia come in and appraise a home in Bowie or Hyattsville or Upper Marlboro,” said Taylor, a Democrat who represents part of Prince George’s County. “If we were to have more of a pipeline of appraisers from our own communities that we could be using in our communities, then I think we would have more fair appraisals.
A low-balled appraisal value can affect a family for generations, said Maureen Yap, vice president of public policy and senior counsel for fair lending at the National Fair Housing Alliance, because owning a home and building equity is the main way to build wealth in the United States.
”For families of color, they are facing kind-of hits to their potential home equity at every turn,” Yap said. “They might not get the housing that they can afford. They may not be paying the interest rate that matches their credit profile — it may be higher. And then finally, they might not be able to refinance and take out the home equity that they deserve as part of what their property is worth in order to do the things that kind-of further the American Dream — the home ownership itself, starting a small business, paying for college, etc.”
Getting more people of color into the appraisal field would help reduce the discrimination that leads to artificially lower appraisals, Yap said, but a college degree isn’t the biggest barrier to entry. The hardest requirement to fulfill is that before someone can get their license in Maryland, they must complete more than 1,000 hours of appraisal work experience, under the supervision of another licensed appraiser.
“The supervisor has to split their fee and provide hundreds of hours of training and oversight,” Yap said. “And then they're in competition with that same person in the same geography.”
Those requirements are set by the Appraisal Foundation for appraisers nationwide, rather than by states. Yap said there’s not much states can do to diversify the industry until the Appraisal Foundation changes the requirements.
